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How does costing relate to an innovation project?
Cost is a factor that firms need to take under serious consideration when evaluating a new idea. While many firms do evaluate their cost of the innovation – the internal cost to develop and distribute – they do not always look at the true cost to the customer to acquire and use. These can be seen as “inside-out” and “outside-in” views of innovation. To be successful, an innovative company needs to consider the ultimate cost the customer will pay to acquire and use a product or service.
What factors need to be considered?
Most of the factors used to evaluate an innovation initiative require that the innovator consider the customer or consumer’s point of view. It is important that an innovation offers the customer more convenience (or another benefit) than existing options.
How to determine if an innovation offers the customer more value? Unfortunately, the “outside-in” viewpoint is not the common starting point for most innovators. Typical organizations innovate around internal technologies or capabilities, and then proceed to seek market feedback through the “inside-out” innovation approach. The customer’s cost, however, is a factor that can only be considered from the customer’s viewpoint.
Most of the factors used to evaluate an innovation initiative require that the innovator consider the customer or consumer’s point of view. It is important that an innovation offers the customer more convenience (or another benefit) than existing options.
How to determine if an innovation offers the customer more value? Unfortunately, the “outside-in” viewpoint is not the common starting point for most innovators. Typical organizations innovate around internal technologies or capabilities, and then proceed to seek market feedback through the “inside-out” innovation approach. The customer’s cost, however, is a factor that can only be considered from the customer’s viewpoint.